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CFEnergia has signed a 24-year contract to supply natural gas to an 866 MW power plant of Spain’s Iberdrola now under construction in northern Mexico. The CFE said the contract is valued at some $4 billion.

The plant, known as El Carmen, is due to come on stream in two years’ time. It represents an investment of $450 million by Iberdrola, Mexico’s leading private-sector power generator.

CFEnergia is the relatively new fuels marketing arm of Mexico’s state power utility, the CFE.

El Carmen, located in the municipality of Nuevo Leon, will become the first combined-cycle plant to provide to Mexico’s wholesale power market, a result of the country’s 2013 energy reform. Nuevo Leon’s state capital, Monterrey, is regarded as the powerhouse of Mexico’s private-sector industry.

CFEnergia already provides natural gas to three Iberdrola plants: Altamira V, in the northern Gulf Coast state of Tamaulipas; Tamazunchale, in San Luis Potosi, central Mexico; and Baja California III on the Baja peninsula.

The pipeline that will supply the El Carmen plant is the 302 kilometer Howard Energy Partners pipeline that connects Webb County, Texas to Escobedo in Nuevo Leon. That same pipeline will connect to a forthcoming neighboring Iberdrola power plant, thus converting the municipality of Escobedo into a strategic focus area for the company in Mexico, the Spanish company said in a press statement. Escobedo will have an installed capacity of 2,000 MW, it added.

“Given Nuevo Leon’s strategic importance as private-sector industrial hub, all this is very significant, “ Arturo Carranza, of the Mexican Institute of Public Administration told NGI. “CFEnergia will be well placed to cash in on other business opportunities in the region.”

State oil company Pemex was traditionally the producer, importer, and supplier of natural gas to Mexican industry. But more recently it has been overshadowed in many ways by the CFE, which began to import natural gas on a large scale in recent years as its power plants began to be converted from other fuels.

“These days, the top priorities of Pemex appear to be upstream farm-outs, the efforts to sustain the falling production of oil and natural gas, and the problems faced by its refineries. Marketing natural gas has taken a back seat for Pemex,” said Carranza.

Meanwhile, late last month, CFEnergia signed a $240 million natural gas supply contract with steelmaker ArcelorMittal. CFEnergia will provide ArcelorMittal with 160 MMcf/d over the duration of a 12-month contract. The steelmaker is Mexico’s largest industrial consumer of natural gas.

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